M/s Fateh Chand Charitable Trust Versus CIT (Exemptions) Lucknow

2016 (4) TMI 1119 - ITAT LUCKNOW

Registration u/s 12AA denied - Held that:- Undisputedly, the assessee has taken receipt of donation as part of its income and the same was applied for charitable purposes and these facts are borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee.
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The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was applied for non-charitable purposes. The allegation of the Revenu .....

ranted to the assessee. Even assuming, for the sake of argument, that if the assessee has received donation on making payment in cash and it may be his own money which was introduced in the trust through circuitous means, but it was applied for charitable purposes, therefore, it cannot be added under section 68 of the Act. Thus, even on merit, we do not find any force in the allegations raised by the Revenue. The ld. Commissioner of Income Tax (Exemptions) has cancelled the registration under se .....

- ITA No. 792/LKW/2015 - Dated:- 18-3-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER For The Appellant : Shri. Ajay Wadhwa, Advocate For The Respondent : Shri. A. K. Singh, CIT (DR) ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the assessee against the order of the ld. Commissioner of Income Tax (Exemptions) cancelling the registration earlier granted to the assessee under section 12AA of the Income Tax Act, 1961 (hereinafter called in short .....

ose of profit. (ii) The Ld. CIT (Exemptions) has erred in challenging the genuineness of the activities of the trust by stating that the said activities are not being carried out in accordance of the object of the trust. 3. (i) The Ld. Commissioner of Income-tax (Exemptions) has erred in cancelling the registration of the applicant on the ground that applicant has received voluntary donation in exchange of cash and was not justified in stating without any basis that the applicant is making clear .....

examination to the appellant. 4. The Ld. Commissioner of Income-tax (Exemptions) was not justified in cancelling the registration without giving any meaningful opportunity to the appellant to show cause. 2. The facts in brief borne out from the record are that the assessee-trust was formed on 26.10.1980 to impart education in medical, dental, paramedical sciences, etc. and also running a hospital for providing medical aid beside other charitable objects. The assessee-trust was granted registrati .....

were received in lieu of cash by the assessee from M/s Herbicure Health Care Bio Herbal Research Foundation of Kolkata in assessment year 2011-12 and having relied upon the statement of Shri. Swapan Ranjan Das Gupta, the founder Director of M/s Herbicure Health Care Bio Herbal Research Foundation, the ld. Commissioner of Income Tax (Exemptions) issued shown cause notice for cancellation of registration under section 12AA(3) of the Act to the assessee on 13.11.2015 for compliance on 24.11.2015. O .....

Health Care Bio Herbal Research Foundation. The report of the ld. Commissioner of Income Tax (Exemptions), Kolkata along with statement of M/s Herbicure Health Care Bio Herbal Research Foundation was shown to the assessee on 27.11.2015. The assessee emphatically denied the allegations made by the Revenue with regard to the receipt of donation of ₹ 1 crore on payment in cash to M/s Herbicure Health Care Bio Herbal Research Foundation. However, it was stated on behalf of the assessee that in .....

very year and apparently, the assessee is generating huge amount of cash by charging the capitation fees from the parents of the students and this cash has been used to obtain or manage the donation from M/s Herbicure Health Care Bio Herbal Research Foundation by way of cheque after paying commission to M/s Herbicure Health Care Bio Herbal Research Foundation. 4. Aggrieved, the assessee has preferred an appeal before the Tribunal with the submission that as per audited accounts and computation o .....

M/s Herbicure Health Care Bio Herbal Research Foundation wherein they have accepted and confirmed having given donation of ₹ 1 crore to the trust. The PAN card and other details of M/s Herbicure Health Care Bio Herbal Research Foundation were filed before the Assessing Officer during the course of assessment proceedings. After conducting enquiries and applying his mind and being satisfied with the explanations furnished on behalf of the trust, the Assessing Officer has accepted the afores .....

ommissioner of Income Tax (Exemptions) did not confront the report of the ld. Commissioner of Income Tax (Exemptions), Kolkata with respect to M/s Herbicure Health Care Bio Herbal Research Foundation and statement of Shri. Swapan Ranjan Das Gupta, founder Director of M/s Herbicure Health Care Bio Herbal Research Foundation to the assessee. The assessee was also not allowed to make his detailed submission in this regard, as the ld. Commissioner of Income Tax (Exemptions) has shown this to the ass .....

has specifically pointed out the ld. Commissioner of Income Tax (Exemptions) that till date no evidence to the contrary has been made available to the assessee which could substantiate their allegation that the amount of ₹ 1 crore was paid by the assessee in cash to the donor in exchange of donation received by cheque. Further, the assessee has stated that in case there is any authentic material is available with him, which could throw some light on this issue, the same may be given to the .....

as further urged that even if this amount is treated to be unexplained receipts in the hands of the assessee, addition under section 68 of the Act is not called for, as it was applied for charitable purposes to achieve the objects of the assessee. In support of these contentions, the ld. counsel for the assessee has placed reliance upon the judgment of the Hon ble Allahabad High Court in the case of CIT vs. Chhadami Lal Jain Trust, 106 ITR 179. Reliance was also placed upon the judgment of Hon b .....

ng a charitable trust. 7. The ld. counsel for the assessee has also placed reliance upon the judgment of the Hon ble Apex Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, 62 taxmann.com 3 wherein it has been held that where an addition is based merely on facts and evidence of a third party, the same cannot be used if the right to cross examine is not allowed to the assessee. It was also held by the Hon ble Apex Court that in such a situation, the entire assessme .....

xman.com 427, in which it is held that assessment proceedings initiated mechanically on the basis of information supplied by the Investigation Wing deserves to be quashed. Similar view was also expressed by the Hon ble High Court of Delhi in the case of Sarthak Securities Co. (P) Ltd. Vs. Income Tax Officer, 195 Taxman 262. 9. The ld. counsel for the assessee has further contended that even in the case of illegal income if it is applied for the charitable purposes, the registration under section .....

on 12A of the Act cannot be denied. 10. Besides, reliance was also placed upon the following judgment:- 1) Scientific Educational Advancement Society vs. Union of India and Another (P&H), CWP No.2052 of 2009. 11. Reliance was also placed upon the order of the Tribunal in the case of Income Tax Officer vs. M/s Saraswati Educational Charitable Trust in I.T.A. No. 776/LKW/2014, in which it was held that once the donations received was taken as income of the assessee which was applied for charit .....

under section 12AA(3) of the Act to the assessee on 13.11.2015 for compliance on 24.11.2015. On 24.11.2015 the assessee sought adjournment and hearing was adjourned to 27.11.2015. On 27.11.2015 the assessee has filed a detailed reply to the charges leveled against it in show cause notice. The assessee emphatically denied the allegations leveled against the assessee that it has received a donation of ₹ 1 crore through cheque after making payment of the same in cash to M/s Herbicure Health C .....

t him. For the sake of reference, we extract para 8 as under:- 8. That your goodself has, in your notice dated 13/11/2015, alleged that the assessee has received a donation of ₹ 1,00,00,000/- from M/s Herbicure Health Care Bio Herbal Research Foundation in the A/Y 2011-12 by paying an amount of ₹ 1,00,00,000/- in cash to M/s Herbicure Health Care Bio Herbal Research Foundation itself. This allegation is totally untrue as nothing of this sort has been written or mentioned in the confi .....

that a specific reply on the same could be submitted on it. 14. It is also evident from record that the report received from the ld. Commissioner of Income Tax (Exemptions), Kolkata and the statement of Shri. Swapan Ranjan Das Gupta, Director of M/s Herbicure Health Care Bio Herbal Research Foundation was simply shown to the assessee on 27.11.2015, but no opportunity was afforded to the assessee either to cross-examine the said witness or to make any further comments in this regard and the ld. .....

instant case ld. Commissioner of Income Tax (Exemptions) has simply received information from the ld. Commissioner of Income Tax (Exemptions), Kolkata that M/s Herbicure Health Care Bio Herbal Research Foundation was engaged in giving donations on receipt of cash through brokers, but nowhere it has been stated that M/s Herbicure Health Care Bio Herbal Research Foundation has paid donation to the assessee on receipt of cash of the equal amount through brokers. Similar statement of Shri. Swapan Ra .....

e same may be provided to the assessee so that the assessee can make a proper reply. But without affording any further opportunity to the assessee, the ld. Commissioner of Income Tax has passed an order of cancellation on the very same day. 15. It is settled position of law that any evidence collected at the back of the assessee cannot be used adversely unless and until it is confronted to the assessee and the assessee is allowed to cross-examine the witness, if any. 16. Our attention was also i .....

justice because of which the assessee was adversely effected. Their Lordships have, however, held that it is to be borne in mind that the order of the ld. Commissioner of Income Tax was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statement and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. The Hon ble Apex Court accordingly held that in the testimony of these two witne .....

jurisdictional High Court in the case of CIT vs. Uttaranchal Welfare Society, 42 taxmann.com 361, in which their Lordships have held that section 68 of the Act has no application where assessee had disclosed donations as its income. While relying on this proposition of law, their Lordships have followed the view taken by Hon ble Delhi High Court in the case of DIT (Exemptions) vs. Keshav Social & Charitable Foundation, 278 ITR 152 and the judgment of the Hon ble Apex court in the case of S.R .....

pressed by the Chennai Bench of the Tribunal in the case of Padanilam Welfare Trust vs. DCIT (supra) in which it was held that merely because capitation fee was collected by the assessee-trust from students, the same would not constitute the violation of the provisions of granting registration under section 12AA of the Act where there was no valid allegation against the assessee that the income of the trust has not been applied for educational activities. 20. Similar view was also expressed by t .....

extracted hereunder for the sake of reference:- 8.Though the Revenue has taken a plea that for anonymous donation, provisions of section 115BBC of the Act can be invoked but in the instant case where the assessee has filed various documents to prove the identity of the donors, these donations cannot be called to be anonymous. So far as applicability of provisions of section 68 of the Act is concerned, it has been held by various High Courts including the jurisdictional High Court that once dona .....

e borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee. The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was applied for non-charitable purposes. The allegation of the Revenue is only that the donation was received by the assessee on making payment in cash to M/s Herbicure Health Care Bio Herbal Research Foundation, but to substantiate this claim, no evidence was brou .....